What is the real cost of marketing? - Factor 3

What is the real cost of marketing?

It’s one of the most frequently asked questions in our line of work: how much will it cost? can you give me a figure for my budget sheet? what level of expenditure are we looking at? will you let me have an estimate before we start work? There is a virtual obsession with ‘the number’, but maybe there’s a better way of looking at it.

Let’s be honest, there are very few companies that like spending money on marketing. Precious few companies love their ads, brochures, websites, signs and press releases. At least not like their agencies – the people who created them – do. What’s to love, anyway? Companies, quite rightly, just love what these commodities eventually end up returning in increased sales.

So, marketing has to be one of the most instantly unrewarding purchases; not like buying a new pair of shoes – they make you look better straight away. Therein lies the problem: no one would buy a pair of shoes that stood a really good chance of making you look good in a year’s time. It’s the time lag between investment and return that makes marketing such a tricky cost to justify. It’s often even invisible, not just delayed.

Those who, I’d imagine, do enjoy spending money on marketing are well known to us all: Coca Cola, Nike, Apple, McDonald’s, Tesco – you get the idea. It seems an obvious point, but there has to be a reason that companies like these spend millions and millions of pounds on the stuff each and every year. Instead of viewing marketing as a cost, it is seen as an investment in an even greater future return.

It’s a common misconception that stepping back from investing in marketing – taking a break for x, y or z reason – means that you’re just standing still for a while. It stands to reason that if others around you are spending and you’re not that you must, in fact, be going backwards. All companies have designs on growing their market share, so I wonder how many, if they knew the level of marketing investment required to simply maintain their market share and position when times are hard, rather than regress, would choose to invest exactly that level of expenditure, rather than stop spending altogether.

It’s a tried and trusted analogy, but one that illustrates the point perfectly: it takes an almighty effort – a really big push – to get the fly wheel rolling but, once it’s rolling at a decent speed, it only needs relatively small, frequent taps to keep it going. The same is true with marketing – get it right and keep it constant, because stopping and starting is hugely inefficient.

Even then, if a company invests in marketing at the same level as its competitors, then it becomes a competition in who has the best agency. Only by investing more than your closest competition will you give yourself a genuine chance to outstrip them. Ask yourself what you’d imagine the market leaders within your industry spend on marketing, then compare that to your own budget. Does it, any more, seem a mystery as to why the market leader continues to outperform the competition and report such impressive profit margins? I’m not saying that marketing is the sole reason that companies grow and are profitable, but neither is it an insignificant piece of the jigsaw.

For every company that’s not prepared to invest in persuading people to buy its products or services, there’s a multitude that are. And, these days, companies can no longer even afford to only be concerned by domestic competition.

All of this said, agencies continue to find it challenging to encourage their clients to invest in marketing at the appropriate level. It seems strange that we should need to defend the concept of spending money to improve the financial performance of our clients. Of course, we’re getting paid for our time but, apart from that, there’s nothing in it for us – we don’t get a slice of the pie when it’s cooked. As cut and dried as it sounds, it ultimately makes no difference to an agency whether its clients grow, shrink or stay the same.

No one needs to be convinced about what would happen if you tried to build a car with most, but not all, the necessary parts, or if you went skydiving but chose not to take your parachute. It really is no less obvious what happens to a company that doesn’t invest appropriately in marketing.

What’s the real cost of marketing? Easy: not marketing.


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